Very Scary Stuff

by Pejman Yousefzadeh on April 24, 2009

The outbreak of swine flu that is now being reported in the news is a novel event, which means that there is a whole host of speculation concerning the nature of policy responses to it. Much of that speculation will end up being untrue; right now, it appears that people are trying to think off the top of their heads for solutions, and during such brainstorming periods, a number of ideas get tossed out that ultimately also get tossed aside.

But that doesn’t make the story concerning the swine flu outbreak any less worrisome:

Mexico’s deadly swine flu could disrupt trade and travel between the United States and Mexico if it prompts restrictions on the movement of goods across the border or sparks fear in consumers, analysts say.

The potential impact is far from clear as experts race to learn more about the disease, which has claimed the lives of as many as 61 people. But shipping and travel industries are especially vigilant.

“If you end up with a significant demand shift, you could end up with a very substantial effect on our products, whether it be government-imposed restrictions or alternatively if the consumers just decide to say ‘no’,” said Bob Young, chief economist with the American Farm Bureau Federation.

Since Mexico and Canada are the two largest buyers of U.S. agricultural goods, such restrictions could be a drag on U.S. agriculture, Young said.

Great. Just as it seems that we might be getting ourselves out of the current economic downturn, along comes a black swan of sorts to pull us back in. Oh, and it might kill some people in the process.

If the minds of policymakers are not concentrated yet, they should be. Perhaps, like SARS, this will end up not being a big deal for the United States (though SARS was certainly a big deal in Asia). But it is better to take precautions now. We shouldn’t restrict travel or trade; there isn’t anything even resembling a justification for so drastic an action. But swine flu has the potential to become a tremendously dangerous policy problem. It is nice to see that the World Health Organization is ready with supplies of Tamiflu, but given how much Tamiflu has been used, isn’t there a danger that this current strain of swine flu may be resistant?

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